It is not every quarter that you get to spot drastic changes in the equity portfolio of Jeffrey Ubben‘s ValueAct Capital. The fund invests with a long term perspective and the average holding period of its stock picks is in the vicinity of three years. However, there was a surprise packed in for investors tracking ValueAct Capital, according to the firm’s latest 13F filing with the SEC for the reporting period of March 31.
Prior to establishing ValueAct in 2000, Ubben served for five years in Richard Blum‘s Blum Capital Partners as a Managing Partner. ValueAct is a relatively large fund with $19.4 billion in assets under management. The market value of its equity portfolio increased to $18.09 billion from $15.96 billion at the end of the fourth quarter. The technology and healthcare sectors contributed the most to this value, with the top holdings being Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Microsoft Corporation (NASDAQ:MSFT), and Halliburton Company (NYSE:HAL). As is expected of long-term investing, the turnover ratio of 20% for the first quarter was towards the lower end. ValueAct also has a concentrated portfolio with a total of 15 holdings, with its top three picks constituting nearly 47% of the fund’s portfolio value.
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Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was ValueAct’s largest holding and remained unchanged at 19.39 million shares, valued at $3.85 billion. It represented about 21.28% of the fund’s portfolio value. The stock has appreciated by a staggering 57% so far this year. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) reported impressive first quarter financial results, posting a 108% increase in net income from the same quarter last year with an EPS of $0.21, while revenues of $2.19 billion also marked a 15.9% increase on a year-over-year basis. During the company’s earnings call, Mike Pearson, CEO of Valeant Pharmaceuticals Intl Inc (NYSE:VRX), announced that the the latest acquisitions of Dandreon and Salix have almost been integrated and that the company expects that synergies from Salix will exceed $530 million, most of it being realized by the end of the second quarter. Meanwhile, Dandreon’s $130 million in synergies will most likely be realized by the end of this year. After ValueAct, Andreas Halvorsen‘s Viking Global and Stephen Mandel’s Lone Pine Capital are the second and third-largest stockholders of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) respectively, among the funds we track.
ValueAct’s Microsoft Corporation (NASDAQ:MSFT) holding occupied the second spot in its portfolio, with the position being increased by 1% over the quarter to 75.27 million shares valued at $3.06 billion. Microsoft Corporation (NASDAQ:MSFT) hasn’t let declining revenues from its Windows segment affect to its performance over the past year, as the stock has appreciated by more than 20% in this time period. The renewed focus on cloud services by its CEO, Satya Nadella has proven to be quite a catalyst for the $390.69 billion software giant. Microsoft Corporation (NASDAQ:MSFT)’s cloud products including Office 365, Azure, and Dynamics CRM have been gaining traction among both enterprise customers and consumers. With the launch of its new Windows 10, which will have seven different versions including Mobile, Mobile Enterprise and IoT Core, Microsoft is also hoping to gain a greater market share of the smartphone market. Although it held the number three spot in market share in the mobile industry last year according to IDC, its share only amounted to 2.7%, well behind the market share of Google Inc (NASDAQGOOG)’s Android and Apple Inc. (NASDAQ:AAPL)’s iOS. Other prominent stockholders of Microsoft Corporation (NASDAQ:MSFT) include Jean-Marie Eveillard’s First Eagle Investment Management and Boykin Curry’s Eagle Management.
Moving on to the surprise that was packed into ValueAct’s first quarter filing, the fund increased its stake in Halliburton Company (NYSE:HAL) by a hefty 61% during the quarter to 33.76 million shares valued at $1.48 billion. The stock is up by nearly 19% year-to-date on the back of rebounding oil prices (Crude Oil WTI futures are up by about 7.3%in 2015). Additionally, by cutting expenses and reducing headcount, the company beat estimates for its first quarter financial results, posting an EPS of $0.49, $0.12 ahead of expectations. Halliburton Company (NYSE:HAL) is expected to complete its $35 billion acquisition of Baker Hughes in the second quarter of this year. Besides Ubben, Glenn Greenberg and Lee Ainslie also hold Halliburton Company (NYSE:HAL) in their fund’s portfolios.
Disclosure: None
